Independent directors poorly paid in Bangladesh: IFC study

The independent directors in Bangladeshi listed companies are getting poor remuneration against their services at boards, finds a study by the International Finance Corporation (IFC).

In Bangladesh, an independent director is getting an average remuneration of less than Tk1.5 lakh or $1.76 thousand annually.

In neighboring India, independent directors are receiving $10.66 thousand each year on average, reveals the recently published IFC report titled "Portrait of Bangladesh's Independent Directors."

An independent director is the board member of a company who is neither a shareholder of the company, nor represents any shareholder.

Securities regulator, the Bangladesh Securities and Exchange Commission (BSEC) has made it a must for each listed company to ensure that at least one-fifth of their board members are independent directors.

But the existing Corporate Governance Code, enacted in 2018, did not say anything about independent directors' remuneration, though each company must publish their directors' remuneration in annual reports.

IFC study finds that the average annual remuneration of independent directors in Bangladeshi listed companies varies widely by sector.

It ranges between Tk20,000 ($238) in travel and leisure sector to Tk670,000 ($7,976) in food and allied sector.

Remuneration for independent directors in banks -- the sector with the largest market capitalisation-- is slightly above the average remuneration of Tk1.48 lakh.

IFC report also said, professional experience, coupled with the importance of their roles, it is surprising that the average remuneration of directors does not seem to be commensurate with their qualifications and responsibilities.

Independent directors play a vital role in providing oversight and expert guidance on specific matters.

It is essential that their remuneration be competitive enough to attract, reward, and retain highly qualified and committed candidates, yet stay within reasonable limits to prevent jeopardizing their independence, added the report.

In listed companies of Bangladesh, independent directors make up 24 percent of the boards on average, slightly higher than the Corporate Governance Code's requirement.

The IFC study also found that 68 percent of the independent directors are members of the audit committee of their respective companies.

Average tenure of independent directors in boards of Bangladeshi listed companies is 2.4 years, while all but four independent directors are serving only one listed company.

Among the directors, 58 percent of them have a master's degree while their average age is 64 years with an average professional experience of 37 years, according to the report.

Only five percent of independent directors are women, while over 17 percent board seats of listed companies are occupied by women.